With the 2025 Budget going back to the drawing board for a third and hopefully final round, it has reignited fears that Treasury will hike fuel taxes to make up for a R75-billion budgetary shortfall.
The initial budgets proposed no increases to the General Fuel Levy (GFL) or the Road Accident Fund (RAF) Levy for the coming financial year.
However, the Carbon Fuel Levy – which is an add-on to the GFL – rose by 3c per litre to 14c per litre for petrol and 17c per litre for diesel, as required under the Carbon Tax Act of 2019.
The change took effect in April, seeing the GFL climb to R3.99 per litre for petrol and R3.87 per litre for diesel.
The original idea was that increasing the GFL and RAF Levy to make up for lost revenue would put too much pressure on a small portion of the population.
Likewise, Treasury ruled out raising corporate and personal income taxes, as well as refused to take on more debt.
It deemed that an increase to Value-Added Tax (VAT) was the only way to plug its monetary holes, a decision that was met with fierce backlash from the public, civil society organisations, and political parties.
Sanity prevailed, and Minister of Finance Enoch Godongwana announced in late April that the VAT hike would no longer take effect, mere days before it was supposed to come into play.
While we all let out a collective sigh of relief, the original problem remains. Government must find a way to generate R75 billion or risk cutting funding in critical sectors.
An easy target
Fuel taxes are one of the easiest targets for revenue generation.
Motorists rarely think about them when refueling their vehicles as all they see is the price at the pump, but not how much of that price goes to taxes and levies.
Fuel consumption has remained relatively stable in recent years as the country’s total car parc continues to float around 13 million vehicles.
As such, Treasury can also calculate almost exactly how much it must hike the GFL to reach its budgetary goals unlike with other forms of taxes.
In addition, the RAF has called upon the powers that be to increase its bespoke levy on fuels so that it can better fulfill its public mandate of compensating victims of road accidents.
The Fuels Industry Association of South Africa (Fiasa) told TopAuto that it expects the 3c/litre Carbon Fuel levy adjustment to remain after the new budget is tabled on 21 May.
Whether government will raise the GFL any further remains than this remains unclear.
Likewise, the potential adjustment to the RAF levy is currently unpredictable, said Fiasa.
However, it warned that any expansion in the GFL or RAF Levy will directly drive up fuel prices, resulting in higher costs for drivers.
“As fuel prices rise, transportation costs will likely increase, leading to higher prices for goods and services, adding to inflationary pressures,” said Fiasa.
“Many consumers, already feeling financial strain, may find it increasingly difficult to cover daily commuting and travel expenses.”
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